Companies charged in $175 million pyramid scheme

WASHINGTON {AP} The government has charged four companies with using the Internet to con consumers around the globe out of about $175 million in a massive pyramid scheme.

SkyBiz.com, based in Tulsa, Okla., and three partner companies promoted a work-at-home business, charging $125 for an educational Internet software package and the opportunity to earn money by recruiting others to buy the packages, the Federal Trade Commission said Monday.

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The recruits would have to buy one or more packages and then could recruit still more people and so on, earning commissions for those above them in the recruiting chain, the agency said, announcing the details of sealed charges filed on May 30.

"This is one of the biggest pyramid schemes we've seen," said Howard Beales, director of the FTC's consumer protection bureau. He said the Internet is a "quick, cheap way to reach consumers around the world with whatever the latest con is and here it has provided a forum to resurrect one of the oldest scams around."

The agency said in court papers that only people at the very top of the pyramid were successful and most investors lost money.

On June 6, U.S. District Judge Terry C. Kern froze the operation's assets and ordered the companies to halt any illegal activities until a hearing June 26, FTC attorney Jim Elliot said.

Elliot said the government is seeking to disband SkyBiz and return money to consumers.

The FTC charged that the SkyBiz companies and their officers violated federal laws by creating a pyramid scheme, making false claims that consumers would earn large incomes and failing to mention that most people in such schemes lose money.

The four Oklahoma companies named in the lawsuit are SkyBiz.com Inc.; World Service Corporation; Nanci Corporation International; and WorldWide Service Corporation.

Joel Wohlgemuth, lawyer for most of the SkyBiz defendants, and Reuben Davis, lawyer for the Nanci company, declined to comment. Lawyers for Stephen D. McCullough, a SkyBiz vice president, didn't immediately return calls.

The government said that SkyBiz since 1998 has used in-person sales presentations, seminars, teleconferences, Web site presentations and other marketing material to tout the opportunity to earn thousands of dollars a week by recruiting for the program.

An ad for the program claimed that one person was able to retire with a monthly income of $400,000 only six months after joining the SkyBiz program, the FTC said.

The government started investigating the company after receiving complaints from American consumers and from people in Australia, Thailand, India, South Africa and other countries, Elliot said.

He added that Canadian authorities have brought criminal charges against four of the program's associates in their country, an Australian civil case is pending against one associate and the Indian government has raided local SkyBiz offices and frozen their assets.

In its promotional material, SkyBiz says it operates in 200 countries.